In recent forecasts, global brokerage CLSA has adjusted its expectations for Macau’s gaming industry, projecting a notable increase in gross gaming revenue (GGR) despite challenges within the market.
Macau’s Revised Gaming Revenue Forecast
CLSA has revised its 2024 gross gaming revenue forecast for Macau upwards by 3.5%, now estimating a total of US$30.3 billion. This adjustment is attributed to higher visitation rates during historically slower months, suggesting a positive trend in overall gaming demand.
Compared to 2023’s GGR of US$22.8 billion, this new projection represents a significant year-on-year growth of 34%. Looking ahead, CLSA predicts further growth to US$31.9 billion in 2025, indicating sustained expansion within the industry.
Factors Driving Growth Amid Challenges
Despite facing macroeconomic headwinds, Macau’s gaming sector continues to exhibit resilience. CLSA analysts Jeffrey Kiang and Leo Pan highlight ongoing normalization of visitation patterns alongside thriving mass gaming demand as key drivers behind this growth.
They emphasize Macau’s niche market positioning, targeting less than 2% of China’s population, as a fundamental factor supporting its stability and potential for growth.
Industry-Wide EBITDA Forecast Adjustments
In contrast to the optimistic revenue projections, CLSA has adjusted its industry-wide earnings before interest, taxes, depreciation, and amortization (EBITDA) forecast downwards by 1% to 3%. This adjustment is attributed to the competitive market landscape and specific disruptions within major casino projects.
Disruptions at Sands China’s The Londoner Macao, part of its Phase 2 revamp, have led CLSA to lower its EBITDA forecast. These challenges highlight the complexities within the market despite overall revenue growth.
Operational Challenges and Investments
The analysts also note that profits are likely to face downward pressure throughout the year due to significant investments by concessionaires amidst intense competition. Companies like Galaxy, Melco, and SJM are making strategic investments to enhance their offerings and capture premium player segments.
Galaxy, for instance, is implementing smart chip technology to optimize promotions and improve table turnover. Similarly, Melco emphasizes the need for higher promotional efficiency to maintain competitiveness.
Impact of Londoner Phase 2 Revamp
The ongoing revamp of Sands China’s The Londoner Macao Phase 2 is expected to cause disruptions in operations from the second to the fourth quarter of 2024. This is likely to impact Sands China’s market share for the year, with other concessionaires expected to gain ground.
However, CLSA anticipates that Sands China will reap substantial rewards from this revamp starting in 2025, highlighting the strategic long-term vision behind such investments.
Macau’s gaming industry is poised for substantial revenue growth despite operational challenges and market disruptions. CLSA’s revised forecasts reflect the nuanced dynamics at play, with a focus on sustained visitation trends and evolving strategies among key industry players. While short-term profitability may be impacted, strategic investments and market positioning suggest a positive outlook for Macau’s gaming sector in the coming years.